Port of Camas-Washougal considers renegotiating leases with businesses that use rail line

In an attempt to cover increased maintenance costs, the Port of Camas-Washougal may renegotiate leases with businesses that use the port’s industrial park rail line.

Port Commissioner Larry Keister, a former locomotive engineer, asked port leaders earlier this year to examine the leases to ensure that the port was receiving enough money to pay for its rail upkeep. The port found that rail expenses have totaled approximately $400,000 since 2014, with just $100,000 recouped through the leases in that same timeframe.

“The rail maintenance is very expensive and has to be done,” Keister said. “I was saying, ‘Are we making enough money on the leases from the companies that have rail spurs, or are we losing money?’ It came out that the leases are not covering the expenses.”

The port owns about 5,500 feet of rail line, which originates south of Highway 14, runs into the industrial park and crosses Index Street in Washougal.

“Generally speaking, rail is pretty essential,” said Derek Jaeger, the port’s business development director. “(Some companies are) looking at long-distance (shipping), and rail provides the most cost-effective and fuel-efficient way to move heavy freight and goods. It also reduces congestion by taking some freight trucks off the road.”

Keister agreed, adding that “it’s important for industrial parks to have that amenity for businesses that get bulk chemicals or any type of product that ships by rail.”

“Shipping by rail is considerably cheaper than shipping by truck,” Keister said. “If we did not have spurs, we would have literally hundreds of trucks coming and going every day, which would put additional wear and tear on roads in the park. Having the ability to have materials shipped by rail is a big benefit environmentally and maintenance-wise for infrastructure.”

The port currently manages rail leases with three industrial park tenants — Norwesco ($175 per month for 150 feet of track), Kiva United Energy ($200 per month for 400 feet) and Fitesa ($240 per month for 800 feet) — and is currently negotiating leases with three other businesses.

“In terms of rail and rail use at our port, it’s very small in terms of capacity and operations as compared to other ports,” Jaeger said. “We just don’t see the volume that you would at some of the other ports, but we understand it’s highly important for the industrial park because for some of (the businesses), it’s the function of their existence.”

Jaeger and Jessica Warta, the port’s lease administrator, delivered a presentation about the rail leases during the port commission’s May 7 workshop and showed 10-year revenue and expenditures, current rail leases and the possibility of discussing short-term leases with businesses while continuing to evaluate long-term options.

According to Jaeger and Warta, key challenges include operating costs outpacing revenue, inconsistent rate structures and non-uniform agreements.

“The alignment of the track and the switches take a lot of wear and tear,” Keister said. “They need to be maintained and repaired, and occasionally replaced. They get old. We hire a company to do the technical maintenance, but it’s the port’s responsibility to maintain it at a level that’s required by the railroad company.”

The port will continue to analyze rail rates and structures and align leases with market rates.

“We’re working through a couple new license agreements right now,” Jaeger said, “and I think that just by standardizing and restructuring some of our rates, that we’ll be able to definitely meet some of the financial objectives for what we want to do.”

Norwesco is in the second renewal period of a 10-year term with four 10-year options. Kiva United Energy’s term ends in 2026, but it is negotiating to lease an additional 600 feet of track. Fitesa has had an indefinite license agreement in effect since 1982.

“We may have to renegotiate some of these legacy agreements and establish some new agreements,” Jaeger said.

According to a staff report, port leaders expect the revised rail lease and rate structure to create additional revenue to support capital and operational expenses, but they said they need more time to determine specific impacts and work with existing companies that depend on the industrial park rail line.

“We want to get the information from the businesses about the value of the rail spurs, then renegotiate the contract to cover the maintenance expense,” Keister said. “It’s important that we keep the rail spurs, but we don’t want to provide that service at a loss.”